The Party's Over; Why Plan Like It's 1999? CFO (11/02) Vol. 18, No. 12 p.20; Newell, Gale E.; Kreuze, Jerry G.; Hurtt, David
Critics complain that investment return assumptions and
interest rate assumptions are outdated and that pension plan
sponsors need to update them to reflect current conditions.
Stephen Church, president of Piscataqua Research, says plan
sponsors have become more aggressive over the years, noting the
fact that both interest rate assumptions and investment return
assumptions are inflated. The problem, according to Church, is
that plan sponsors are overstating interest rates by 1 percent to
2 percent. This means that companies like General Motors, which
earlier this year contributed $2.2 billion to its pension fund,
still owes about $20 billion.